Raw material prices: Why oranges are more expensive than they have been since 1966

Anyone who is currently roaming the supermarkets looking for offers has to pass the shelf with orange juices.

Raw material prices: Why oranges are more expensive than they have been since 1966

Anyone who is currently roaming the supermarkets looking for offers has to pass the shelf with orange juices. The price of oranges imported into the European Union (EU) rose by up to 89 percent last year. The preliminary product is therefore more expensive than it has been since 1966. Even before the last price jump, the Association of the German Fruit Juice Industry (VdF) had warned: "We are in the most difficult situation for more than 50 years." The warehouses in Brazil are virtually empty, and the harvests in the USA have failed. The availability of orange juice concentrate is “massively limited”.

On the raw materials exchange in New York, the price of orange juice recently rose to around $3.10. In Germany's supermarkets, the price per liter of orange juice recently broke the two-euro mark. Consumers are already switching to other juices.

Orange juice is traded via futures on futures markets and is one of the “soft commodities”. This refers to agricultural raw materials, including orange juice, coffee, rice, sugar, wheat, cotton and pork bellies. The standard product is futures for frozen category A orange juice concentrate, which must come from the US state of Florida, Brazil, Mexico and Costa Rica. The orange juice future is traded in US dollar cents per American pound (lb). One future is 15,000 lbs. One pound is approximately 0.45 kilograms. This means that a kilo of concentrate costs 6.32 euros.

Why the low stocks in South America are so problematic, especially for the European market: 90 percent of the concentrate imported into the EU comes from Brazil. However, since transport costs to the USA are lower and people pay more there, the orange juice is now flowing there, VdF managing director Klaus Heitlinger told the AFP news agency.

The orange juice crisis has three reasons: The US state of Florida has been plagued by a disease for 18 years for which there is still no known cure. Although yellow dragon disease does not affect humans, it has reduced citrus fruit production in Florida by more than 75 percent since it was discovered in 2005. The bacterial pathogen makes oranges so bitter that juice cannot be obtained from them. Most recently, it was also reported in California, where 80 percent of the citrus fruits consumed in the United States come from. The US Department of Agriculture released $11 million last year to find an antidote for citrus greening disease. In Europe, where the production country Spain is particularly affected, the EU is funding similar projects.

Climate change is also having a negative impact on the orange industry. According to a 2022 American study, global warming is causing oranges to last less, be more susceptible to disease and lose quality. This makes transport from the plantation to the juice producer more difficult and expensive, where the higher costs then reduce profits if the end product is not sold at a higher price. Using more pesticides to protect oranges from bacteria, viruses and fungi that are more likely to survive at higher temperatures further increases production costs.

Global warming is accompanied by extreme weather events such as hurricanes or floods, which can destroy entire plantations. In August 2023, Hurricane Idalia alone caused billions of dollars in damage in three US states. In Spain, where most of Europe's citrus fruits grow, droughts reduced the harvest by almost 23 percent compared to 2022.

“The price of oranges was historically high last year,” confirms raw materials expert Robert Rethfeld from Wellenreiter-Invest to Capital. "I assume that the price has reached its high and is likely to fall again in the medium term, which is what we are currently seeing." In the next two years, the level of last winter will probably not be reached again.

One reason for this is that the extreme weather event El Niño will weaken in the next few months. El Niño is an unusually warm ocean current in the Pacific that occurs approximately every four years and most recently began in June 2023. The phenomenon encouraged increased hurricane activity off the coast of Florida, destroying crops there. “This phase is over for now,” said Rethfeld.

An antidote will also be found for the yellow dragon disease. "Of course the companies want to protect their plantations and are investing in the development of appropriate pesticides. I am convinced that a solution will be found in the medium term." If this succeeds, the prices on supermarket shelves for orange juice should also fall significantly again.

This article first appeared in the business magazine "Capital", which, like stern, is part of RTL Deutschland.